nep-ino New Economics Papers
on Innovation
Issue of 2012‒09‒30
seventeen papers chosen by
Steffen Lippert
University of Otago, Dunedin

  1. Generation and diffusion of innovations in a District Innovation System: The case of ink-jet printing By Reig-Otero,Y.; Edwards-Schachter,M.; Feliú-Mingarro,C.; Fernández De Lucio,I.
  2. Innovative Parents and Entrepreneurial Spawning By Lööf, Hans; Nabavi, Pardis; Bazzazian , Navid
  3. Innovation Process in Japan in the Early 2000s as Seen from Inventors: Agenda for strengthening innovative capability (Japanese) By NAGAOKA Sadao; TSUKADA Naotoshi; ONISHI Koichiro; NISHIMURA Yoichiro
  4. The case against patents By Michele Boldrin; David K. Levine
  5. Microeconometric evidence of financing frictions and innovative activity By Tiwari, Amaresh K.; Mohnen, Pierre; Palm, Franz C.; Schim van der Loeff, Sybrand
  6. Research Productivity and the Quality of Interregional Knowledge Networks By Tamás Sebestyén; Attila Varga
  7. Why Entrepreneurs Choose Risky R&D Projects - But Still Not Risky Enough By Färnstrand Damsgaard, Erika; Norbäck, Pehr-Johan; Persson, Lars; Vasconcelos, Helder
  8. Business Groups, Innovation and Institutional Voids in Latin America By Fulvio , Castellacci
  9. The Determinants of Invention in Electricity Generation Technologies: A Patent Data Analysis By Elisa Lanzi; Ivan Haščič; Nick Johnstone
  10. Strategic product R&D investment policy under international rivalry in the presence of demand spillover effects By Tsuyoshi Toshimitsu
  11. Product Innovation with Lumpy Investment By Chahim, M.; Grass, D.; Hartl, R.F.; Kort, P.M.
  12. Technological Change and Wages in China: Evidence From Matched Employer-Employee Data By Vinod Mishra; Russell Smyth
  13. Analysis of the Characteristics of the Innovation System for the JSIC Service Sector: A measurement of innovation factor sensitivities using a text mining method (Japanese) By OZAKI Masahiko
  14. Risk Management strategies in a highly uncertain environment: undesrtanding the role of common unknown By Olga Kokshagina; Pascal Le Masson; Benoit Weil; Patrick Cogez
  15. Guanxi, performance and innovation in entrepreneurial service projects. By Iván Arribas; Penélope Hernández; Jose E. Vila
  16. Does Size Matter? Scale, Corruption and Uncertainty By Gonzalo F. Forgues-Puccio; Ibrahim M. Okumu
  17. Two-part tariff licensing mechanisms By San Martín Lizarralde, Marta; Saracho de la Torre, Ana Isabel

  1. By: Reig-Otero,Y.; Edwards-Schachter,M.; Feliú-Mingarro,C.; Fernández De Lucio,I.
    Abstract: This paper provides an in-depth case study of the ink-jet printing (IJP) technology that emerged from a mature industrial sector in the Castellon region (Spain) in the first decade of 2000. We propose an analytical framework that combines the theoretical perspectives of Industrial Districts and Innovation Systems, and exploit a qualitative methodology that includes information from patent and scientific article databases, technical literature and 21 interviews. Our results show that IJP is a major innovation that breaks with the tradition of machinery innovations in this industry in Spain. We provide micro-level evidence of the complex external and internal relationships in the innovation process. Internal ties, trust relations and strong in-house R&D were the determinants of the IJP innovation. In contrast to the literature, we find that secrecy and patenting play key roles in the sharing of knowledge and the innovation strategy.
    Keywords: innovation system, industrial district, learning region, technology, ceramic tile, ink-jet printing
    JEL: O31 O33 Q55
    Date: 2012–09–20
  2. By: Lööf, Hans (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Nabavi, Pardis (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Bazzazian , Navid (Strategy and Business Policy, HEC, Paris)
    Abstract: This paper analyzes how different innovation-strategies of incumbent firms affect the quantity and quality of their entrepreneurial spawning. Using a data set that comprises almost all patent applications by firms in Sweden for the period 1997-2008, we distinguishes between firms that are engaged in innovation activities persistently, occasionally and not at all. We do not find any statistically significant evidence that the chance of survival for a new firm can be linked back to the innovation strategy of the parent firm. In contrast, we provide strong evidence that employee start-ups from persistent innovators are more productive during the first five year on the market than other new ventures, everything else equal.
    Keywords: Patent; R&D; Spinoff; Productivity; Employment
    JEL: C23 O31 O32
    Date: 2012–09–17
  3. By: NAGAOKA Sadao; TSUKADA Naotoshi; ONISHI Koichiro; NISHIMURA Yoichiro
    Abstract: This report presents an overview of the results of an inventor survey, focusing on Japanese inventions for which priority claims were filed during the period 2003 to 2005 with both the Japan Patent Office (JPO) and the European Patent Office (EPO). This survey, conducted as a part of an international research collaboration also comprising surveys of inventions in Europe and the United States, collected around 3,300 complete responses, translating to a 23% response rate. With the questionnaire designed to ask the characteristics of inventors as well as that of the innovation process, new evidence has been provided on such issues as the differences in invention activities depending on the manner in which the inventors' obtained their Ph.D. degrees—whether it was received in the regular way or based only on dissertation—, inventors' awareness of potential research competitors, the importance of patent literature as knowledge stock, status of remunerations to inventors, patent sales, start-ups, standard-based patents, the economic value of patent portfolios, and economic value by degree of inventiveness. The paper discusses the major findings as well as their implications on innovation policy.
    Date: 2012–09
  4. By: Michele Boldrin; David K. Levine
    Abstract: The case against patents can be summarized briefly: there is no empirical evidence that they serve to increase innovation and productivity. There is strong evidence, instead, that patents have many negative consequences.
    Keywords: Patents ; Productivity
    Date: 2012
  5. By: Tiwari, Amaresh K. (University of Liege); Mohnen, Pierre (UNU-MERIT/MGSoG, Maastricht University, and CIRANO); Palm, Franz C. (Maastricht University, and CESifo); Schim van der Loeff, Sybrand (Maastricht University)
    Abstract: Using a unique panel data of Dutch innovation and financial variables we empirically investigate how financing and innovation vary across firm characteristics. The study also tries to gauge the extent of market failure due to the presence of financing frictions. Our main findings can be summarized as follows. First, when firms face endogenous financial constraints, debt financing and innovation choices are not independent of firm characteristics such as age, size, and existing leverage. In the absence of financial constraints, however, firms, almost uniformly across firm characteristics, become less inclined - as compared to firms facing constraints - to engage in innovative activity by raising debt. Second, small, young, highly leveraged, and firms with lower collateralizable assets are more likely to be financially constrained. Third, large, young, and low leveraged firms are more likely to be innovators. Fourth, financial constraints adversely affect a firm’s R&D intensity. Fifth, smaller and younger firms are more R&D intensive. A new estimator, that combines the method of "Correlated Random Effects" and "Control Function" to account for the endogeneity of regressors in a structural equations model, is developed.
    Keywords: Financial Constraints, Capital Structure, R&D, Innovation, Firm Characteristics, Panel Data, Correlated Random Effects, Control Function
    JEL: G30 O30 C30
    Date: 2012
  6. By: Tamás Sebestyén (Department of Economics and Regional Studies, University of Pécs); Attila Varga (Department of Economics and Regional Studies, University of Pécs)
    Abstract: This paper estimates the impact of interregional knowledge flows on the productivity of research at the regional level. We develop the novel index of ’ego network quality’ in order to measure the value of knowledge that can be accessed from a particular region’s global knowledge network. Quality of interregional knowledge networks is related to the size of knowledge accumulated by the partners (‘knowledge potential’), the extent of collaboration among partners (‘local density’) and the position of partners in the entire knowledge network (‘global embeddedness’). Ego network quality impact on the productivity of research in scientific publications and patenting at the regional level is tested with co-patenting and EU Framework Program collaboration data for 189 European NUTS 2 regions.
    Keywords: patents, scientific publications, knowledge networks, R&D productivity, regional knowledge production function, European regions
    JEL: O33 R11 R58
    Date: 2012–06
  7. By: Färnstrand Damsgaard, Erika (National Institute of Economic Research); Norbäck, Pehr-Johan (Research Institute of Industrial Economics (IFN)); Persson, Lars (Research Institute of Industrial Economics (IFN)); Vasconcelos, Helder (Faculdade de Economia, Universidade do Porto)
    Abstract: Entrepreneurs face higher commercialization costs than incumbents. We show that this implies that entrepreneurs will choose more risky projects than incumbents, aiming to reduce their high expected marginal commercialization cost. However, entrepreneurs may select too safe projects from a social point of view, since they do not internalize the business stealing effect. We also show that commercialization support induces entrepreneurship but may lead to mediocre entrepreneurship by inducing entrepreneurs to choose less risky projects, whereas R&D support encourages entrepreneurship without affecting the type of entrepreneurship. Using Swedish patent citation data, we find empirical support for predictions of the model.
    Keywords: Entrepreneurship; Innovation; Start-ups; Ownership; Breakthrough; Quality
    JEL: G24 L10 L20 M13 O30
    Date: 2012–09–18
  8. By: Fulvio , Castellacci
    Abstract: The paper presents an empirical analysis of the innovative activities of business groups in Latin America. It compares the innovativeness of group-affiliated firms (GAFs) and standalone firms (SAFs), and it investigates how country-specific institutional factors – financial, legal, and labor market institutions – affect the group-innovation relationship. The empirical analysis is based on the most recent wave of the World Bank Enterprise Survey (period 2010-2011), and it focuses on a sample of 6500 manufacturing firms across 20 Latin American countries. The econometric results point out two major conclusions. First, GAFs are more innovative than SAFs: we estimate the innovation propensity of GAFs to be 9% higher than that of SAFs. Secondly, across countries, the innovativeness of GAFs is higher for national economies with a better institutional system than for countries with a less efficient institutional set up.
    Keywords: Business groups; innovation; institutional voids; emerging economies; Latin America
    JEL: O1 L2 D2 P5 O54 M2 O3 L1
    Date: 2012–09
  9. By: Elisa Lanzi; Ivan Haščič; Nick Johnstone
    Abstract: This paper analyses the determinants of invention in efficiency-enhancing electricity generation technologies that have the potential to facilitate climate change mitigation efforts, including fossil fuelbased technologies aimed at reducing carbon emissions, renewables and nuclear technologies. The evolution of inventive activity in these technologies is analysed by considering patent data for 11 OECD countries over the period 1978-2008. The analysis considers various drivers of inventive activity, including R&D expenditures and electricity consumption, but pay particular attention to the role of fossil fuel prices because they suggest the impact that price mechanisms such as emissions trading and carbon taxes are likely to have on invention in the electricity generation sector.<P> The results show that the effect of fossil fuel prices varies according to the different types of technologies. As fossil fuel prices increase, inventive activity in renewable energy technologies increases while the effect of on fossil fuel-based technologies is positive but with decreasing increments. The results show that there is no effect of fossil fuel prices on patenting activity in nuclear energy technologies. These results illustrate that there may be a price-induced switching between renewable and fossil fuel-based technologies. As fossil fuel prices rise, an efficiency effect encourages inventive activity in both fossil fuelbased and renewable technologies. As fossil fuel prices increase further, invention in fossil fuel-based technologies starts declining suggesting that a substitution effect drives away innovation from fossil fuelbased towards renewable energy technologies.
    Keywords: innovation, energy, patents, climate change
    JEL: Q4 Q54 Q55
    Date: 2012–09–14
  10. By: Tsuyoshi Toshimitsu (School of Economics, Kwansei Gakuin University)
    Abstract: This paper first presents the optimal conditions for strategic R&D investment policy in the cases of noncooperative and cooperative R&D investment policies with international rivalry. Then we deal with a model of strategic product (i.e., quality-improving) R&D investment competition. In particular, we analyze an optimal R&D investment policy with regard to the two cases in the presence of demand spillover effects associated with improving the quality of a product. We show how optimality depends on the strength of demand spillover effects. We also consider the same problems assuming heterogeneous consumers and alternative utility functions.
    Keywords: strategic R&D investment policy; quality choice; international rivalry; demand spillover effects
    JEL: F12 F13 L13
    Date: 2012–09
  11. By: Chahim, M.; Grass, D.; Hartl, R.F.; Kort, P.M. (Tilburg University, Center for Economic Research)
    Abstract: Abstract: This paper considers a firm that has the option to undertake product innovations. For each product innovation the firm has to install a new production plant. We find that investments are larger and occur in a later stadium when more of the old capital stock needs to be scrapped. Moreover, we obtain that the firm’s investments increase when the technology produces more profitable products. We see that the firm in the beginning of the planning period adopts new technologies faster as time proceeds, but later on the opposite happens. Furthermore, we find that the firm does not invest such that marginal profit is zero, but instead marginal profit is negative. Moreover, we find that if the time it takes to double the efficiency of technology is larger than the time it takes for the capital stock to depreciate, the firm undertakes an initial investment. Finally, we show that when demand decreases over time and when fixed investment cost is higher, that the firm invests less throughout the planning period, the time between two investments increases and that the first investment is delayed.
    Keywords: Impuls Control Maximum Principle;Optimal Control;discrete continuous system;state-jumps;product innovation;retrofitting.
    JEL: C61 D90
    Date: 2012
  12. By: Vinod Mishra; Russell Smyth
    Abstract: We examine the relationship between research and development (R&D) intensity and wages, using a unique matched employer-employee dataset. The dataset has the advantage that it links firm-level investment in R&D to individual employee wages and allows us to control for both employee and employer characteristics. Our main finding is that a one standard deviation increase in R&D intensity is associated with an increase in the hourly wage rate between 3.4 per cent and 6.9 per cent for the full sample, depending on the exact specification. We find that the wage elasticity with respect to R&D intensity is higher in larger firms as well as for better educated workers and workers with technical certification/skills. We also find, consistent with the rent-sharing hypothesis, that the wage elasticity with respect to R&D intensity is higher for workers who belong to the Communist Party or trade union.
    Keywords: R&D, China, Wages, Shanghai
    JEL: J31 O31
    Date: 2012–09
  13. By: OZAKI Masahiko
    Abstract: The vitalization of the service sector is one of the major economic issues in Japan, where the service sector accounts for more than 70% of GDP and concerns exist of a reduction in potential growth through population decline and the weakening of global competitiveness. However, empirical studies on the innovation factors and productivity in the service sector have faced significant difficulties due to limited data availability (e.g. poor statistical data) and problems of the sectoral classification (e.g. existence of establishments with varying characteristics of the innovation system in each sector). This paper challenges the latter problem by making categories based on the characteristics of the innovation system for the Japan Standard Industrial Classification (JSIC) service sectors (4-digit). Applying a text mining method, we quantitatively measure sensitivities of three innovation factors—(1) knowledge and technologies, (2) actors and networks, and (3) institutions following the concept of "sectoral systems of innovation" by F. Malerva—and reveal the characteristics of the innovation system which each service sector has. We also classify the JSIC service sectors (4-digit) into eight categories that have specific innovation potential according to the proper innovation system obtained from the revealed characteristics. In addition, our study finds a positive correlation between promoting innovation factors ((1) and (2)) and long-term performance (production and total factor productivity (TFP) calculated by the Japan Industrial Productivity (JIP) database), and that innovation factor (3) controls the performance.
    Date: 2012–09
  14. By: Olga Kokshagina (CGS - Centre de Gestion Scientifique - Mines ParisTech, ST-CROLLES - STMicroelectronics (Crolles) - STMicroelectronics); Pascal Le Masson (CGS - Centre de Gestion Scientifique - Mines ParisTech); Benoit Weil (CGS - Centre de Gestion Scientifique - Mines ParisTech); Patrick Cogez (ST-CROLLES - STMicroelectronics (Crolles) - STMicroelectronics)
    Abstract: This work deals with strategies of risk management techniques in projects and portfolios in the situation of radical innovation. Existing literature suggests different methods of risk management at the level of 1) projects (S1) (unknown reduction by selecting a priori the less uncertain projects, depending on the identified market and technological risk) 2) portfolio (S2) (consists in using an existing platform core to construct several options. This strategy increases chances to succeed by increasing the size of the sample, maximizing the total economic value of the portfolio of derivatives). These methods consider different level of uncertainties and are independent from each other. We will show that there exists another strategy (S3) of working on "common unknown" of multiple options but its managerial implementation is not obvious. By testing the proposed framework in two cases of Advanced R&D (explorative phase of new technologies development for unknown markets with fixed budget) in semiconductor industry, we compare identified S3 strategy with existing S1' lead by S2'. The paper demonstrates that management of "common unknown" is possible and could be implemented in the context of largely unknown exploration. The proposed strategy of working on common unknown opens a new way to portfolio risk management in the context of radical innovation. Using S3 framework of knowledge gap identification to construct common unknown core, company can build its innovative capabilities through knowledge management and better position to innovate in emerging fields.
    Keywords: Risk management, uncertainty, common unknown, project portfolio, platform core, platform derivatives
    Date: 2012–06–17
  15. By: Iván Arribas (ERI-CES); Penélope Hernández (ERI-CES); Jose E. Vila (ERI-CES)
    Abstract: This paper analyzes the role played by two dimensions of entrepreneurs’ private social capital in the survival, growth and innovativeness of entrepreneurial service ventures: local size and preferential attachment degree. We build a bi-dimensional measure of social capital based on network models and a methodology to estimate this measure for any group of entrepreneurs. Based on a survey of service entrepreneurs who launched their business in the city of Shanghai, we show that roles played by each dimension are quite different. A large local size of the network increases the chances of survival of the new venture. However, the chance to become a dynamic venture is only related to entrepreneurs’ preferential attachment degree. This finding has relevant political and managerial implications.
    Keywords: social capital, networks, innovation, entrepreneurship
    Date: 2012–09
  16. By: Gonzalo F. Forgues-Puccio; Ibrahim M. Okumu
    Abstract: We study the role of the size of the economy in mitigating the impact of public sector corruption on economic development. The analysis is based on a dynamic general equilibrium model in which growth occurs endogenously through the invention and manufacture of new intermediate goods that are used in the production of output. Potential innovators decide to enter the market considering the fraction of future profits that may be lost to corruption. We find that depending on the predictability of bribes, the size of the economy may be an important factor in determining the effects of corruption on innovation and economic growth.
    Keywords: Corruption, population size, innovation, growth, uncertainty
    JEL: D73 O11 O31 O41
    Date: 2012–07–01
  17. By: San Martín Lizarralde, Marta; Saracho de la Torre, Ana Isabel
    Abstract: Most of the patent licensing agreements that are observed include royalties, in particular per-unit or ad valorem royalties. This paper shows that in a differ entiated duopoly that competes á la Cournot the optimal contract for an internal patentee always includes a positive royalty. Moreover, we show that the patentee would prefer to use ad valorem royalties rather than per-unit royalties when goods are complements or when they are substitutes and the degree of differentiation is suffciently low. The reason is that by including an ad valorem royalty in the licensing contract the patentee can commit strategically to be more (less) aggressive when goods are complements (substitutes) since his licensing revenues become increasing with the price of output of his rival. As a result, licensing may hurt consumers although it always increases social welfare.
    Keywords: patent licensing, royalty, cournot duopoly, product differentiation
    JEL: D45
    Date: 2012–06

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